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Facebook Continues Its Offensive Against Google’s YouTube

Two large moves from Facebook could bring increased competition to Google's YouTube.

Facebook's (NASDAQ:FB) push into video has been swift and aggressive. The company boasted in June 2014 that its large user base was watching 1 billion videos daily. During Facebook's recently reported first-quarter earnings conference call, CEO Mark Zuckerberg reported that number grew to 4 billion views daily. And while it still pales in comparison to Google's (NASDAQ:GOOGL)(NASDAQ:GOOG) YouTube, which boasts nearly 8 billion views a day, the competition has certainly narrowed.

To be fair to YouTube, Zuckerberg's figure appears to be a total number of Facebook views, and is not mutually exclusive. For example, a YouTube video viewed on Facebook would count for both figures. The issue for YouTube, however, is that Facebook has built out its native video platform, and has been stealing market share from YouTube as brands have been publishing their videos directly on Facebook and cutting Google out of the monetization process.

Still, Google has perhaps a better value proposition for marketers, as Facebook's autoplay and 3-second definition of a "view" were somewhat at odds with their desire to pay for quality views. In addition, Google's well-defined monetization program allows video-content creators to monetize their videos, where Facebook's native uploading did not. Neither of these factors are true anymore.

When is a view actually a view...Facebook thinks 10 secondsIn what may be a move to become more friendly with advertisers, Facebook appears to be offering advertisers both a cost-per-click model and a cost-per-impression model. For those not familiar with marketing lingo, the former is generally more expensive on a per-count basis, as ads with interaction (or that are "clicked" on) are of theoretically higher quality than those only viewed.

It appears Facebook is keeping the cost-per-impression model it currently offers in place for those comfortable with the arrangement as is. For those migrating to Facebook's cost-per-click pricing model -- a slight misnomer, considering the company is counting watching an ad for longer as an interaction -- Facebook will charge advertisers only after 10 seconds of viewing.

For Facebook, this is a good move and brings its advertising closer to YouTube's host of choices. For advertisers, added features like YouTube's True View, in which an advertiser does not have to pay for an ad unless a user watches the entire video (or 30-seconds), make YouTube more advertiser-friendly. But it seems as if Facebook is working to offer more-comprehensive and tailored solutions to advertisers...and that can't be good for YouTube.

Facebook's suggested videos pay what YouTube paysThe reason the ad-pay structure has been discussed more, and may be more important to Facebook's business model, is that Facebook's working on nullifying Google's advantage with non-advertising content creators. For media companies and Google's YouTube celebrities who create video content for the sole purpose of selling ad space, Google was, and still is, a better deal from a monetization standpoint. But it seems like Facebook is working hard to negate YouTube's advantage here as well.

Over the last few weeks, Variety reports that Facebook has added a small-scale "suggested videos" feature on the iPhone app. The company has partnered with content providers, Fox Sports, Funny or Die, and Hearst, among other content providers, to deliver curated videos. Apparently Facebook is now splitting the revenue from in-line advertising 45%/55%, with the creator keeping the larger percentage. For a comparison, YouTube has the same split percentages.

And while it's important to note this is only a small-scale test, YouTube is currently running into problems with its large stars as it attempts to introduce a new, unproven business model. The move to native publishing on Facebook could look quite tempting to these stars if Facebook works on video monetization for creators with large fan bases.

Jamal Carnette has no position in any stocks mentioned. The Motley Fool recommends Facebook, Google (A shares), and Google (C shares). The Motley Fool owns shares of Facebook, Google (A shares), and Google (C shares). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Author

Inspired by the idea of "making your money work for you" at a young age, mostly because he was a lazy child, Jamal parlayed that inspiration into a love of the psychology of markets, competitive advantages, and thematic investing. He later shrug off that laziness, with a career that included stints as a mortgage trainer, a financial advisor, a Sr. Investments Communications Specialist, and a stockbroker. Jamal graduated from George Mason University with a bachelors of science in finance, American University with a masters in finance, and is a CFA charterholder.